Last week, U.S. stocks ended gains of nearly 4%. To the lows of March 23, the S&P500 rose by 35%, due to the very active stance of the fed and the US authorities. It's largely possible to tell and about other countries. Just a case of the States most visible, with a weekly report of the Federal reserve: the graph clearly shows how buying on a balance of $2.5 trillion. was pushing the S&P500 up in the previous weeks.
If we look at historical data, we see what lessons the market has learned from similar dynamics. In 2008, a surge of purchases on the fed's balance sheet for many more months did not prevent the pair to fall. S&P500 has found its bottom in March 2009, when the most intense phase of asset purchases has been completed.
In subsequent years, the fed has repeatedly launched QE: then we've had enough declarations of intent to divert graphs of stock indices up.
In March and April, the fed was more aggressive. Moreover, investors already knew what to do: buy back shares and raise funds on debt markets.
At the same time, it is necessary to understand that the fed is not buying stocks on its balance sheet and buys bonds. This, in turn, reduces the interest rate. The stock market is, in part, is growing due to the desire of investors to obtain at least some yield. All this is powered by the belief that the fed will be able to return the economy to growth.
Worrisome that the fed reduces the amount of weekly deals. In the last two weeks of March and the official balance sheet increased by 586 and 557 billion, and in the last two weeks it was 82.8 65.5 billion and
After that quiet down and the buyers of the shares. In 2017, the markets managed to find domestic drivers of growth, despite the passive position of the Federal reserve, and even some time to go against the reducing balance. However, the 2019 growth has indirectly ensured by the actions of the regulator.
, Such complacency on the part of investors may remain predominant as long as the visible manifestation of horrendous performance drop income employees of small companies and their transition to more fuel-efficient model costs.
The question remains: now with record high unemployment and the inability of many industries to fully function, whether the markets once again to find domestic drivers of growth? While it's hard to believe.
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